Jan. 7 (Bloomberg) -- The U.S. recession remained a drag on
health-care spending three years after it ended as a net of 9.4
million people lost private insurance coverage before key
provisions of Obamacare had begun, a government report showed.

Spending on hospitals, doctors, drugs and other health-care
services rose 3.7 percent to $2.8 trillion in 2012, or about
17.2 percent of gross domestic product, actuaries at the Centers
for Medicare and Medicaid Services said in a report published
yesterday in the journal Health Affairs. Growth was 6.3 percent
at the end of 2007, when the U.S. entered an 18-month recession.

The 2010 Patient Protection and Affordable Care Act’s
largest health-care expansions didn’t begin until this year,
including private insurance for about 2.1 million new people and
expanded Medicaid coverage for others. CMS actuaries have said
spending should jump by 6.1 percent in 2014 as a result.

“Expanded coverage is going to cause spending to go up,”
Charles Roehrig, the director of the Altarum Institute’s Center
for Sustainable Health Spending in Ann Arbor, Michigan, which
studies cost growth, said in a phone interview.

Prescription drugs and nursing home costs had led the
slowdown. Blockbuster drugs including Pfizer Inc.’s Lipitor,
Sanofi’s Plavix and Merck & Co.’s Singulair lost patent
protection in late 2011 and 2012, causing retail prescription
prices to increase 0.4 percent in 2012, the actuaries said.

About three-quarters of U.S. prescriptions cost $10 or less
in 2012, Anne Martin, an economist in the agency’s actuary
office, told reporters at a news conference.

Hospital Dollars

While drugmakers dealt with a pullback, hospitals and
physicians’ offices grew faster in 2012 than a year earlier.
Hospitals consumed more health-care dollars than any other
industry, increasing revenue 4.9 percent to $882 billion. Prices
increased 2.5 percent, and the higher utilization and intensity
of hospital services contributed to the rest.

No developed nation spends more than the U.S. on health
care, either in nominal terms or as a proportion of gross
domestic product, and policy makers are struggling to find ways
to keep costs in check. Health-care costs “skyrocketed” prior
to Obama taking office in 2009, and the Affordable Care Act
“has helped stop that trend,” Jeanne Lambrew, deputy assistant
to the president for health policy, said in a blog post.

“While there is a debate about how much the Affordable
Care Act has contributed to this health cost slowdown, there is
no doubt that it reduced Medicare spending growth, and most
experts believe that Medicare savings spill over into the
private sector,” Lambrew said in the blog.

Obamacare Debate

The Affordable Care Act is estimated to have added about $5
billion in additional spending from 2010 to 2012, Martin of CMS
said, based on projections from September. With total health
spending of more than $8 trillion over the same period, that
means the health law was responsible for less than 0.1 percent,
she said in an e-mail.

The $1.4 trillion law known as Obamacare requires most
Americans to obtain health insurance by April or pay a penalty
of as much as 1 percent of their income. To make finding
coverage easier and control insurance costs, the law set up
government-run exchanges in each state where most consumers can
buy plans from private companies with the help of tax credits.

The government is seeking to get about 7 million people to
sign up for exchange plans by March 31.

Medicare, the U.S. health program for disabled people and
those 65 and older, accounted for about 20 percent of spending
in 2012, and Medicaid, the state-run program for the poor, 15
percent. Spending on Medicaid is expected to rise as the law
expanded the program in at least half the U.S. states to cover
more people earning close to poverty wages.

Private Plans

Some policies in the health law, including a requirement
that children younger than age 26 be allowed to remain on their
parents’ health plans, have raised spending, while other
provisions including cuts to hospital Medicare payments have
offset the increase.

Private health insurers including UnitedHealth Group Inc.
and WellPoint Inc. paid about 33 percent of the nation’s medical
bills, more than any other payer. Americans spent about $917
billion on insurance premiums, 3.2 percent more than a year
earlier. Insurers received about $110 billion, or about 12
percent of premiums, the actuaries said.

Plans with high deductibles -- at least $1,200 for an
individual -- were carried by 31 percent of Americans under age
65, the actuaries said. The higher out-of-pocket costs
associated with those plans contributed to less total spending
as unemployment rose and wages stagnated.

“Declining enrollment was a major factor in the slow
growth in overall private health insurance spending in the past
several years,” the actuaries said in their report.

‘Psychological Change’

Health-care spending has been braking since shortly after
the turn of the century, when the growth rate peaked at 9.7
percent in 2003. It had slowed to 6.5 percent by 2006.

“It takes several years for recessionary effects to work
their way through the health sector and the health-care
industry,” Aaron Catlin, deputy director of the CMS actuary’s
National Health Statistics Group, said at the news conference.

Consumers seemed to have experienced a “psychological
change” during the recession that ended in 2009 and reduced
their use of health services, even when they had insurance, said
Joe Antos, a health economist at the American Enterprise
Institute in Washington who advises the Congressional Budget
Office.

“The recession really knocked the heck out of all
consumption,” he said in a phone interview. “In one sense it’s
good news we’re continuing to see, at least through 2012, slow
growth in health spending. On the other hand, I think we should
be concerned why that is the case.”